CEO pay dives in a rough 2008

CEOs had a rough 2008. First, their image sank to new lows as the Wall Street and economic collapse fanned public outrage. Then most, even those far removed from the financial sector, took a blow to their wealth, as well.

That's clear now that U.S. companies are deep into the period in which they tell shareholders how much top executives earned in 2008 — a year when most Americans got a refresher course in financial pain.

Take the apparent 2008 compensation champion for CEOs of Standard & Poor's 500 companies: Chesapeake Energy's CHK Aubrey McClendon. On paper, his compensation totaled $112 million, including a $77 million bonus that was more than three times larger than any other CEO's and came in a year when the natural gas producer's stock fell 58%.

While it might be hard to muster sympathy, 2008 was difficult financially for McClendon, 49. The co-founder of Chesapeake owned 5.5% of the company, a stake worth $2.3 billion when the stock peaked at $74 in July, ranking him 134th among the Forbes 400 richest Americans.

But McClendon gambled on the success of his company and bought Chesapeake stock on margin; when his stock tanked, he was forced to sell almost all his shares for $595 million in October to cover a margin call. That left him about $2 billion poorer. He may never see the Forbes list again.

That was an extreme example of what a subpar year it was for CEOs in almost every compensation category. A USA TODAY analysis of executive compensation data provided by the Associated Press found that the median salary of a CEO running an S&P 500 company rose 3% last year to surpass $1 million. The median bonus and other incentive cash dropped 27% to $1.3 million, and total compensation was down 7% to $7.6 million.

In many cases, it was worse than it looked, because Securities and Exchange Commission rules require companies to value options and other stock grants based on the dates they were granted. According to AP, 90% of the $1.2 billion in CEO options granted last year are under water, which means the current stock price is too low to yield a profit.

Motorola's MOT Sanjay Jha had total compensation of $104.4 million in 2008, second to McClendon. But of that, $103.5 million came in stock options and grants in August to lure him away from Qualcomm, when Motorola stock was about $10 a share. It closed Thursday at $5.53. His 16.5 million options won't turn profitable until the stock gets back above $10, but his stock grants are still worth about $20 million.

The USA TODAY/AP examination was of 387 S&P 500 companies that filed proxies this calendar year through April 20.

Salaries still not shabby

But don't go looking for CEOs in bread lines just yet. The brutal bear market that hurt them so badly in 2008 could actually help them later by creating ripe conditions for huge potential paydays. Because of 13-year lows in stocks in early 2009, most CEOs received additional stock grants and stock options this year at fire-sale prices.

American Express AXP CEO Kenneth Chenault was fifth-highest in total compensation last year, making $43 million. Like other CEOs, his numbers overestimate actual wealth creation. His stock options and stock awards were valued at $34 million when issued, but by early March, American Express stock fell below $10 a share, making Chenault's options going back several years all but worthless. American Express stock declined 64% last year and was down 63% in a three-year period (2006-08).

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